Govt may hike stake in few public sector banks

In a seeming contrast to disinvestment in other PSUs, the government is considering a proposal to increase its stake in select public sector banks where it holds close to the regulatory requirement of 51 per cent.

The government may hike stake in banks where it has close to 51 per cent as part of recapitalisation scheme, official sources said.

However, the ministry has to decide as to how to increase the government's holding in the banks, sources said, adding, if the Centre's stake goes up it would provide banks headroom to raise capital by diluting stake in future.

One of the options being considered for the purpose is issue of Perpetual Non-cumulative Preference Shares (PNCPS), sources said.

There are six public sector banks where the government holding is less than 55 per cent. Those who fall in the category include Bank of Baroda, Oriental Bank of Commerce, Andhra Bank, Dena Bank, IDBI Bank and Vijaya Bank.

The Centre's holding in Bank of Baroda stands at 53.8 per cent, Oriental Bank of Commerce 51.1 per cent while in case of Andhra Bank, it is 51.6 per cent.

IDBI Bank, Dena Bank and Vijaya Bank, the government holding is 52.7 per cent, 51.2 per cent and 53.9 per cent, respectively.

To enhance capacity lending capacity, the government has decided to infuse funds.

The capital would basically come from the World Bank and the shortfall, if any, would be met by the government, sources said, adding that the total amount is yet to be worked out.

State-owned banking sector comprises 20 nationalised banks, State Bank of India and its six subsidiaries. So far, as many as 18 nationalised banks have sought fresh infusion of funds from the government.

The World Bank is providing a loan of about Rs 10,000 crore for the injection of capital in the public sector banks.

The fund would be released after the Parliamentary nod as it is part of supplementary demand for grants to be tabled in the winter session, sources added.

The winter session of Parliament will begin from November 19.

As it is, Rs 2,700 crore have been proposed in the 2009-10 Budget for recapitalisation of the four public sector banks.

Of this, Rs 2,150 crore would be given for the recapitalisation package for three public sector banks -- UCO Bank, Central Bank of India and Vijaya Bank.

UCO Bank is expected to get Rs 750 crore, while Central Bank of India and Vijaya Bank will receive Rs 700 crore each.